SF Last Stop In Ukrainian Money Laundering Case

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A former Ukrainian prime minister was resentenced in federal court in San Francisco today to eight years and one month in prison for laundering $21.7 million in extorted funds through U.S. banks.

Pavel Lazarenko, 56, was prime minister in 1996 and 1997 and fled to the United States in 1999, where he later bought a $6.7 million house in Novato.

He was originally sentenced in 2006 to nine years in prison following his 2004 conviction on 14 money laundering and fraud counts.

The resentencing came after a federal appeals court last year overturned six of the counts, but upheld his conviction on eight counts of laundering money extorted from a Ukrainian businessman in the 1990s.

The six dismissed counts related to a separate alleged fraud of transferring to the United States $14 million in profits looted from a state-owned dairy farm in Ukraine.

Prosecutors said Lazarenko extorted the $21.7 million from Peter Kiritchenko beginning in 1992, when Lazarenko was a regional governor, until 1999, by requiring Kiritchenko to turn over half his profits from his agriculture and metals import and export company as a condition of doing business.

They said he laundered the money in a complex series of transactions that went through banks in Poland, Switzerland and Antigua and ended in banks in San Francisco.

U.S. District Judge Charles Breyer, in pronouncing the new sentence, said, “The message must go forward that the United States will not become a safe haven for funds that have been obtained with an illicit purpose.”

Breyer also ordered Lazarenko to pay a $9 million fine and will hold a hearing later on how much restitution he must pay Kiritchenko.

Lazarenko told the judge, “In the past 10 years I have come to a full understanding. Every way that I personally could punish myself, I have punished myself. After my release I will go to the Ukraine to work hard and work honestly.”

Lazarenko has been in custody for about half of the past decade, but was allowed release on home detention and an $86 million bond between June 2003 and October 2008.

A probation officer told Breyer at the hearing that the cost of a security task force to maintain the house arrest during that period was $850,000, paid by Lazarenko.

The former prime minister was sent back to a federal prison in Dublin on Oct. 1, 2008, after the 9th U.S. Circuit Court of Appeals in San Francisco on Sept. 26 upheld his conviction on the eight money laundering counts.

Defense attorney Dennis Riordan estimated that with credit for time served and good behavior, Lazarenko will serve between one year and six months and two years and eight months of additional prison time.

Lazarenko was only the second former foreign leader to be prosecuted in a U.S. court.
The first was deposed Gen. Manuel Noriega of Panama, who was convicted in federal court in Miami in 1992 of cocaine trafficking and sentenced to 30 years in prison.

Lazarenko’s unusual case required prosecutors to prove both that the money laundering and other alleged crimes violated American law and that the money was gained illegally under Ukrainian law in effect at the time.

Defense lawyers argued that Lazarenko gained his vast wealth legally during a tumultuous time in the 1990s as Ukraine moved from a Communist to a capitalist economy.
Prosecutors charged he “engaged in massive abuse of both his public office and the United States’ financial system.”

Kiritchenko, who had moved to Sausalito in 1995, was a prosecution witness in Lazarenko’s trial.

Lazarenko at one point faced a total of 53 U.S. criminal counts, but the case was pared down as it moved through the federal courts.

He was originally indicted in 2000 on 33 counts of laundering $114 million and in 2001, the charges were expanded to 53 counts related to $237 million he allegedly gained from extortion and bribes in Ukraine.

The charges included laundering the money extorted from Kiritchenko and transferring to the United States kickbacks allegedly taken from the dairy farm, a natural gas distribution company and a housing enterprise.

Midway through the 2004 trial, U.S. District Judge Martin Jenkins dismissed 24 wire fraud and transfer counts related to the alleged natural gas and housing kickbacks, saying that prosecutors hadn’t proved Lazarenko’s dealings on those projects violated Ukrainian law.
A jury convicted Lazarenko on 29 counts, but in 2005, Jenkins dismissed 15 other counts of wire fraud and transfer of stolen property, saying there wasn’t enough evidence for those convictions.

Last year, a three-judge panel of the appeals court dismissed the six fraud and transfer counts related to alleged dairy farm kickbacks. The panel said allegedly fraudulent bank transfers in 1997 and 1998 were too remote in time from the alleged bribe payments in 1994.

The U.S. Supreme Court last month rejected Lazarenko’s appeal of his conviction on the eight remaining money laundering counts.

The case was transferred to Breyer after Jenkins left the federal bench in 2008 to become a state appeals court judge.

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